The fallacy in Mwenda’s Uganda growth story

He made various arguments all basically adding to the fact that President Museveni has had very impressive performance over his 30 years of rule

Monday February 8 2016

By Muhereza Kyamutetera

On February 3, journalist Andrew Mwenda penned an opinion in The New Vision titled, “Uganda’s growth indicators very impressive”. He made various arguments all basically adding to the fact that President Museveni has had very impressive performance over his 30 years of rule. In fact, he says the decision by his campaign team to market his achievements under a rather lukewarm steady progress promise highlights more of a lack of competence by his marketing team - read campaign team - rather than his actual failures.

But I disagree. In my view, President Museveni’s 30 years can best be compared to someone one who takes three steps in front and two backwards. Yes, they will eventually move from point A to B, but it will take them much longer and certainly cost lots more to get to their destination, than someone who takes one step at a time!

To demonstrate my point, I will use the time between 1997 and 2014 since before 1997, there was no serious record keeping and the figures for 2015 are not yet complete.
First of all, it is not true that Uganda’s value of exports in 2015 is $5.4 billion (he says it is from IMF) - but according to figures from Uganda Bureau of Standards, Uganda Revenue Authority and the Bank of Uganda, Uganda’s exports for the first 11 months of 2015 totalled to $2.41 billion. Given a monthly average of $220 million, we can safely assume the final figures for 2015 will be about $2.630 billion.
Since the final figures for 2015 are not out, it is perhaps more prudent to use the full figures for 2014 - $2.7 billion.

Secondly, Mr Mwenda makes a selective comparison and by all means an erroneous decision to compare Uganda with the likes of South Korea who are edging to full maturity. It is generally well understood that mature markets tend to grow slowly but even then, South Korea whose GDP in 2014 stood at $1.41 trillion, a mere growth of 3.3 per cent in 2014, is equivalent to $46.5 billion, which is nearly twice the entire GDP of Uganda. Even the likes of Thailand and Taiwan, whose GDP is 15 times larger than Uganda’s are way out of our comparison league.
But putting all that aside, while it is true that between 1997 to 2014 Uganda’s GDP has grown by 329 per cent from an average $6.3 billion in 1997 to $27b in 2014 (World Bank figures), to really decide whether that growth has been phenomenal and impactful, you also need to look at the underlying detail.

True, like Mr Mwenda said, our exports have grown phenomenally - by 1,066 per cent from $593 million in 1992 to $2.7 billion - but so has our import bill - by 571 per cent from $710.2 million to $4.76 billion. If you adjust this for the fact that between 1997 and today, the Shilling has depreciated by 209 per cent in value against the dollar from Shs1,083 to Shs3,475 today and add an average annual inflationary growth of 6.8 per cent, then you see this wonderment begin to pale.

Because of a huge appetite for importing, coupled with failure by local industries to create significant and competitive output for the region (partially driven by high cost of borrowing and an erratic Shilling), our current account deficit has widened from just $288 million in 2001 (figures before 2001 are not readily available from BoU) to $2.63 billion. This is largely the reason we have an unreliable Shilling. A current account deficit means the value of imports of goods/ services/ investment incomes is greater than the value of exports.

While some of the reasons why this is the case can be argued to be structural and global in nature and thus beyond Uganda’s control, some of them are purely due to failure to enforce relevant laws. For example, Uganda has lost $658 million in insurance premiums paid to foreign insurance firms despite there being a law that prohibits insurance of risks resident in Uganda by foreign-based insurance firms.
In such an economy characterised by an erratic currency, high cost of borrowing, high inflation, etc., even the private sector, which is the engine of growth, cannot create enough jobs for the country.

Just before you give Mr Museveni the props, you need to factor in that this growth has been financed by heavy borrowing - public debt has grown by 412 per cent from $1.405b to $7.2b. This is despite debt service relief in the late 90s and 2000 of $2 billion.
Our population too, has grown by 129 per cent from 15.2 million to 34.9 million - reason why the 329 per cent growth in GDP only boils down to a mere 147 per cent growth in GDP per capita, from $289 in 1997 to $715 in 2014.

To give Mr Museveni all the props and conveniently forget the donor and NGO component of our economy is what I would call selective amnesia, bordering on intellectual dishonesty. According to figures from BoU between 2001 and 2014, donors have pumped a total of $5.6 billion in budget support and project aid while NGOs have also injected a total of $4 billion.
It is also important to understand that most of the large players in telecoms, financial services, construction, etc., are foreign owned.

It is in fact embarrassing that after 30 years in power, there is not a single Ugandan owned company taking part in any of the large multi-billion Shilling highway construction projects.
While it would also be intellectually dishonest to say under President Museveni, there has been no real growth, perhaps the question we should be asking is, with all the resources that Ugandans and donors have put under the care of Mr Museveni, is this the best return on investment he could have gotten us?
We can only get Mr Museveni and any other leaders to pull up their socks, if we told them the truth.

Mr Kyamutetera is a journalist.